Yeltsin under economic fire

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THE FIRST Western credits will begin flowing into the Russian economy later this month, but the economic path of the Russian government continued to come under internal attack yesterday.

Vasily Selyunin, a leading Russian economist who was an outspoken critic of the Communist system in its dying days, said that the Russian central bank's decision to credit the mutual debts of ailing enterprises was 'confirmation that proponents of a rigid course are coming to power'.

He described the move as heralding a return to the command economy. 'It would be nave to think they envisage its reinstatement in a Communist guise, but if we reject a market economy, we ineluctably go back to a planned one,' said Mr Selyunin in an article in the weekly Rossiya.

The central bank decision has come under heavy criticism from economists who support the radical 'shock therapy' treatment of Yegor Gaidar, the Russian Prime Minister, because, the critics say, it is inflationary and puts paid to all attempts of the Gaidar team to break the old state monopolies.

Yesterday, Ardy Stoutjesdijk, a senior official of the World Bank, which had just announced a new dollars 600m ( pounds 314m) loan to Russia, said the enormous debts of the state enterprises had to be brought under control, but added that it was unclear whether the debt write-off was 'as inflationary as some think'. He said that if the money is going to be made available in cash 'it will be terribly inflationary', but if settling the accounts were achieved by allowing companies to cancel mutual debts, it might not be so drastic. 'What is terribly important is to consider what measures can be taken to prevent their arrears from arising again,' he said.

The problem is that enterprises have been delivering materials to each other and then not paying. 'Clearly measures have to be put into place that enforce deliveries from one enterprise to another only after payment has been made,' said Mr Stoutjesdijk.

The World Bank loan, which will reach Russia by the end of the month, will be partly used to improve the St Petersburg port. Other funds will support privatisation programmes.

The loan was announced after the International Monetary Fund released dollars 1.04bn as the first part of a dollars 24bn aid package for Russia. 'The credit line will make us feel more confident,' said Alexander Shokin, a deputy prime minister. The money will be used to bolster the foreign currency reserves. The credits are needed badly by the government at a time when production continues to fall, unemployment rises and the summer is almost over and Russia faces yet again its long winter.

Conscious of the growing social disruption, government officials are now speaking about putting the needs of the population first. They are also vigorously defending the printing of new money.

Andrie Nechayev, the Economics Minister, said Russia is now printing 260bn roubles a month, equal to the total volume of cash printed in the 30 years to 1991. The first 5,000-rouble bank notes, equivalent to dollars 31 or almost four times the minimum wage, are now in circulation. The notes are intended to help pay a backlog of salaries and pensions totalling more than 220bn roubles. 'The cash deficit is the most important social factor we have got at this moment,' said Mr Nechayev.

(Photograph omitted)

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